Health insurance provides important protection from unexpected medical costs, but it doesn’t come free. Deductibles, copays, and coinsurance all play a part in its cost. To help you better comprehend these costs, we’ve put together a guide to health insurance basics. Discover what terms like deductibles and co-insurance mean, as well as compare plans.
1. Deductibles
As you shop for health insurance, it’s crucial that you understand all of the costs associated with various forms of coverage—this includes understanding your deductible, copays, and coinsurance payments.
Deductibles are the annual payments you must make before your plan will pay for health care services. Individual and family health plans have different deductible amounts; you may also have separate ones for prescription drugs versus hospitalizations. High-deductible health plans (HDHPs) often pair with tax-advantaged health savings accounts to help offset out-of-pocket expenses.
2. Copays
Copayments are an increasingly common cost-sharing mechanism in health insurance plans. They consist of fixed fees paid directly at the time of service for services such as office visits and prescription drugs; health insurers use copays to help manage expenses by decreasing medical bills while discouraging members from seeking unnecessary care.
Knowledge of these differences between copayments and coinsurance will enable you to be an informed health insurance consumer when selecting the plan that meets your needs.
3. Coinsurance
No matter whether you are seeking individual health insurance or group coverage from your employer, understanding copays and coinsurance are vitally important to understanding how health plans operate—these two forms of sharing costs with plans go beyond simply paying the monthly premiums.
Coinsurance plans allow you to pay a percentage (for instance, 20%) of bills once they meet their deductible, with your insurer covering any remaining costs. Payments, on the other hand, are fixed amounts that you pay out-of-pocket regardless of meeting your deductible. They usually count toward your out-of-pocket maximum, but this varies by plan.
4. Out-of-pocket Max
Your out-of-pocket maximum (OOP Max) is the annual maximum you must spend on healthcare costs that are covered by your health insurance plan, reset at each new policy year. Your deductible and copays count towards reaching this threshold; any unpermitted costs like balance billing aren’t.
Understanding how copays and coinsurance interact with your out-of-pocket maximum can help you budget healthcare spending as well as make more informed choices during open enrollment. Furthermore, understanding this aspect can also provide you with greater clarity as to the true cost of health insurance plans.
5. Preventive Care
Health insurance covers preventive healthcare services such as annual checkups and screenings that can detect health problems before they worsen and become costly to treat. Preventive medicine plays an integral part of overall wellness; its aim is to detect health problems early and solve them before becoming serious and costly issues. Under the Affordable Care Act (ACA), most plans must provide free preventive services provided by an in-network physician and meet certain requirements.
Note that tests performed during a preventive care visit could quickly turn diagnostic, potentially incurring additional charges such as deductibles, copays, or coinsurance payments. To prevent surprises and ensure your visit goes as smoothly as possible, always ask your provider which tests count as preventive and which could become medical bills.
6. Emergency Care
Health insurance plans must cover visits to an emergency room for true emergencies, which helps discourage individuals from visiting unnecessarily and incurring high out-of-pocket costs. Many plans now offer urgent care networks that offer medical treatment for non-life-threatening illnesses or injuries that don’t need immediate hospital attention. They can save both time and money by quickly getting you into see a physician without the wait that may accompany visiting your family doctor or visiting an emergency room.
Benefits vary by plan type; however, all Affordable Care Act-compliant health plans must include at least the ten essential benefits, including preventive services, doctors and hospital visits, prescription drugs, and mental health services. To gain more insight into a particular plan’s coverage, request an explanation of benefits (EOB).
7. Preventive Screenings
Health insurance provides coverage for medical tests and screenings designed to detect whether you may be at risk for conditions like diabetes and high blood pressure. Many preventive screenings are provided at no additional charge, provided you visit a provider within your plan’s network.
Routine medical tests and screenings increase your odds of early diagnosis if a health issue develops, helping to better manage it more effectively and possibly even saving on costly procedures such as colonoscopies or heart surgeries. Experts frequently advocate for preventive screenings based on evidence demonstrating their value; however, these screenings aren’t always readily accessible or utilized.
8. Prescription Drugs
Health insurance can help cover prescription drug costs, but costs vary widely. You should select a plan with lower deductibles or copays and select from either a formulary or preferred pharmacy list when choosing medications; these usually won’t require injection or infusion, have high costs, or are considered specialty drugs as these typically won’t be covered.
Your health plan likely offers a drug list called a formulary to show which medications are covered, with lower-cost generics falling under Tier 1 coverage and brand-name medications typically falling into Tier 2. You can log into your member account to view this list as well as locate pharmacies within its network.
9. Mental Health Care
Health insurance plans not only cover medical services but may also assist with mental health coverage depending on which plan you select. The coverage you receive depends on which policy type is purchased.
An easy way to determine if your health insurance policy provides mental health care is by reviewing its details. Check whether there is a provider network and tiered pricing options; different providers may charge different amounts. Make sure that your health insurance policy provides coverage for mental health care with regard to its deductible or copayment amounts and referral options, annual limits, or lifetime caps as applicable.
